http://money.cnn.com/2015/02/
The word Grexit has once again entered the financial vocabulary, after talks on Greece's future within the eurozone collapsed on Monday.
But somehow, the word -- shorthand for Greece's exit from the eurozone -- is not freaking out global markets as much as it once did.
Here is why a Grexit, while undoubtedly painful, might be much less of a deal now than in 2012 or back in 2010, when the eurozone was at the brink of collapse.
1. Stronger creditors: The structure of Greece's debt has changed dramatically. In 2010, 85% of Greek debt was held by private investors, leaving them with plenty to lose.
That ratio has flipped since then -- the latest data from Open Europe show that 80% of Greek government debt is now held by governments and other institutions, such as the IMF and the ECB, which are better equipped to deal with a potential Greek default.
2. Risk is spread out: No single bank holds a significant chunk of the debt either, so no one creditor would take too much of a hit. Plus, foreign banks held just $46 billion of Greek debt at the end of 2014. That compares to $300 billion in 2010, according to data from Wells Fargo and the Bank for International Settlements.
And global banks aren't being punished despite the fact that the debt standoff is shaking confidence in the Greek financial system. The country's biggest banks Piraeus (BPIRF)and Alpha Bank (ALBKF) have lost over 25% in market value so far this year.
Related: How Greece could accidentally stumble out of the euro
3. No fear of domino effect: Greece looks gloomy, but Portugal, Italy and Spain, the other "troubled" eurozone countries, are doing much better after working through their own painful bailout programs.
Bond yields tell the story. Investors are more willing to lend their money to the rest of the group, because they are less afraid these countries would follow Greece out of the eurozone. Spain's 10-year bond yields 1.59%, compared to 7% in 2010. In fact, both Spain and Italy can currently borrow money cheaper than the U.K.
4. ECB stimulus: After years of hesitation, the European Central Bank finally unveiled a big stimulus program in January, making investors very happy. The $1.3 trillion bond buying program is expected to help boost eurozone's growth. The cheap cash can help offset any potential fallout from Greece.
5. Economy growing: Europe, although battling the effects of a long recession, is in better shape now compared to the last time a Grexit was on the cards in 2012.
Eurozone's GDP is growing again -- in the last quarter of 2014, growth even beat expectations. Analysts say cheap oil, falling prices and a weaker euro are helping boost the economy.
6. New plan for member states: When the eurozone crisis first struck in 2010, the bloc's leaders didn't have any framework to turn to if a member state runs into troubles.
Since then, eurozone countries established the $800 billion bailout fund for emergency loans. They also agreed on rules on how countries can access this money.
7. Stocks rising: Investors appear unfazed by the prospect of a wider eurozone crisis. Despite the Greek standoff and a military conflict on the bloc's doorstep, major European stock markets are at record highs.
Related: Grim economic news piles pressure on Greece
The word Grexit has once again entered the financial vocabulary, after talks on Greece's future within the eurozone collapsed on Monday.
But somehow, the word -- shorthand for Greece's exit from the eurozone -- is not freaking out global markets as much as it once did.
Here is why a Grexit, while undoubtedly painful, might be much less of a deal now than in 2012 or back in 2010, when the eurozone was at the brink of collapse.
1. Stronger creditors: The structure of Greece's debt has changed dramatically. In 2010, 85% of Greek debt was held by private investors, leaving them with plenty to lose.
That ratio has flipped since then -- the latest data from Open Europe show that 80% of Greek government debt is now held by governments and other institutions, such as the IMF and the ECB, which are better equipped to deal with a potential Greek default.
2. Risk is spread out: No single bank holds a significant chunk of the debt either, so no one creditor would take too much of a hit. Plus, foreign banks held just $46 billion of Greek debt at the end of 2014. That compares to $300 billion in 2010, according to data from Wells Fargo and the Bank for International Settlements.
And global banks aren't being punished despite the fact that the debt standoff is shaking confidence in the Greek financial system. The country's biggest banks Piraeus (BPIRF)and Alpha Bank (ALBKF) have lost over 25% in market value so far this year.
Related: How Greece could accidentally stumble out of the euro
3. No fear of domino effect: Greece looks gloomy, but Portugal, Italy and Spain, the other "troubled" eurozone countries, are doing much better after working through their own painful bailout programs.
Bond yields tell the story. Investors are more willing to lend their money to the rest of the group, because they are less afraid these countries would follow Greece out of the eurozone. Spain's 10-year bond yields 1.59%, compared to 7% in 2010. In fact, both Spain and Italy can currently borrow money cheaper than the U.K.
4. ECB stimulus: After years of hesitation, the European Central Bank finally unveiled a big stimulus program in January, making investors very happy. The $1.3 trillion bond buying program is expected to help boost eurozone's growth. The cheap cash can help offset any potential fallout from Greece.
5. Economy growing: Europe, although battling the effects of a long recession, is in better shape now compared to the last time a Grexit was on the cards in 2012.
Eurozone's GDP is growing again -- in the last quarter of 2014, growth even beat expectations. Analysts say cheap oil, falling prices and a weaker euro are helping boost the economy.
6. New plan for member states: When the eurozone crisis first struck in 2010, the bloc's leaders didn't have any framework to turn to if a member state runs into troubles.
Since then, eurozone countries established the $800 billion bailout fund for emergency loans. They also agreed on rules on how countries can access this money.
7. Stocks rising: Investors appear unfazed by the prospect of a wider eurozone crisis. Despite the Greek standoff and a military conflict on the bloc's doorstep, major European stock markets are at record highs.
Related: Grim economic news piles pressure on Greece
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